Baidu deepens ties with Tencent-backed SaaS vendor Youzan for e-commerce enabled by mini programs

The search engine allocates USD 30 million for a minority stake in one of Youzan’s subsidiaries.

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Baidu deepens ties with Tencent-backed SaaS vendor Youzan for e-commerce enabled by mini programs

When the number of monthly active users for Baidu’s mini programs hit 250 million in early July, fueled by 150,000 developers, the company made clear that it is wooing e-commerce players and brands.

At the time, Baidu said that 100 brands in various industries have launched online shops on its mini program platform, aided by technologies from Youzan, a Software-as-a-Service (SaaS) vendor that helps companies set up and maintain their online sales portals.

Baidu has just taken its relationship with Youzan to the next level. The two companies have agreed to pour cash into Qima, a non-wholly owned subsidiary of Youzan, to cooperate on mini program development, Youzan said in a filing with the Hong Kong Stock Exchange on Thursday.

Qima is an investment holding company incorporated in the Cayman Islands and is “principally engaged in the e-commerce business which provides a variety of online and offline solutions and services in relation to virtual wholesaling and retailing in China.”

Youzan will buy 26.6 million shares from Qima for USD 45 million. Taking a smaller stake, Baidu SPV, an indirect wholly-owned subsidiary of US-listed Baidu, will purchase 17.7 million shares for USD 177. (No, that wasn’t a typo.) Simultaneously, Baidu Online, another indirect wholly-owned subsidiary of Baidu, will buy Qima Warrants, which can be transferred as 17.7 million Qima shares for about USD 30 million.

All parties have agreed that if Qima Warrants are wholly exercised by its holders, Qima can forfeit all Baidu Qima Shares — those held by Baidu SPV — at nil consideration.

Upon the transactions’ completion, Youzan’s stake in Qima will go from 50.47% to 50.76%, while Baidu will indirectly hold a minority stake.

Youzan said the rationale behind this investment arrangement is to facilitate Baidu Online obtaining the necessary approvals from the relevant authorities in China.

Youzan shares dipped by 2% to HKD 0.47 (USD 0.06) by 11:00 a.m. on Thursday.

In April, Tencent, which also ambitions to cultivate a presence in e-commerce, used one of its subsidiaries to buy more than one billion shares of Youzan at HKD 0.53 (USD 0.07) apiece, which translates to a 6.7% stake in the SaaS vendor.

Tencent is also an investor in e-commerce giant JD.com, brick-and-mortar grocery chain Yonghui, and social commerce platform Pinduoduo. Earlier this year, it led the USD 297 million Series B funding round of Yipien Fresh, a supermarket chain specializing in fresh produce that can be ordered online.